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Updated on: 25 Jan 2021, 04:01
Originally posted by gmatcrook on 27 Jun 2008, 11:40.
Last edited by Sajjad1994 on 25 Jan 2021, 04:01, edited 3 times in total.
Last edited by Sajjad1994 on 25 Jan 2021, 04:01, edited 3 times in total.
Updated - Complete topic (254).
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Since the late 1970’s, in the face of a severe loss of market share in dozens of industries, manufacturers in the United States have been trying to improve productivity—and therefore enhance their international competitiveness—through cost-cutting programs. (Cost-cutting here is defined as raising labor output while holding the amount of labor constant.) However, from 1978 through 1982, productivity—the value of goods manufactured divided by the amount of labor input—did not improve; and while the results were better in the business upturn of the three years following, they ran 25 percent lower than productivity improvements during earlier, post-1945 upturns. At the same time, it became clear that the harder manufactures worked to implement cost-cutting, the more they lost their competitive edge.
With this paradox in mind, I recently visited 25 companies; it became clear to me that the cost-cutting approach to increasing productivity is fundamentally flawed. Manufacturing regularly observes a “40, 40, 20” rule. Roughly 40 percent of any manufacturing-based competitive advantage derives from long-term changes in manufacturing structure (decisions about the number, size, location, and capacity of facilities) and in approaches to materials. Another 40 percent comes from major changes in equipment and process technology. The final 20 percent rests on implementing conventional cost-cutting. This rule does not imply that cost-cutting should not be tried. The well-known tools of this approach—including simplifying jobs and retraining employees to work smarter, not harder—do produce results. But the tools quickly reach the limits of what they can contribute.
Another problem is that the cost-cutting approach hinders innovation and discourages creative people. As Abernathy’s study of automobile manufacturers has shown, an industry can easily become prisoner of its own investments in cost-cutting techniques, reducing its ability to develop new products. And managers under pressure to maximize cost-cutting will resist innovation because they know that more fundamental changes in processes or systems will wreak havoc with the results on which they are measured. Production managers have always seen their job as one of minimizing costs and maximizing output. This dimension of performance has until recently sufficed as a basis of evaluation, but it has created a penny-pinching, mechanistic culture in most factories that has kept away creative managers.
Every company I know that has freed itself from the paradox has done so, in part, by developing and implementing a manufacturing strategy. Such a strategy focuses on the manufacturing structure and on equipment and process technology. In one company a manufacturing strategy that allowed different areas of the factory to specialize in different markets replaced the conventional cost-cutting approach; within three years the company regained its competitive advantage. Together with such strategies, successful companies are also encouraging managers to focus on a wider set of objectives besides cutting costs. There is hope for manufacturing, but it clearly rests on a different way of managing.
With this paradox in mind, I recently visited 25 companies; it became clear to me that the cost-cutting approach to increasing productivity is fundamentally flawed. Manufacturing regularly observes a “40, 40, 20” rule. Roughly 40 percent of any manufacturing-based competitive advantage derives from long-term changes in manufacturing structure (decisions about the number, size, location, and capacity of facilities) and in approaches to materials. Another 40 percent comes from major changes in equipment and process technology. The final 20 percent rests on implementing conventional cost-cutting. This rule does not imply that cost-cutting should not be tried. The well-known tools of this approach—including simplifying jobs and retraining employees to work smarter, not harder—do produce results. But the tools quickly reach the limits of what they can contribute.
Another problem is that the cost-cutting approach hinders innovation and discourages creative people. As Abernathy’s study of automobile manufacturers has shown, an industry can easily become prisoner of its own investments in cost-cutting techniques, reducing its ability to develop new products. And managers under pressure to maximize cost-cutting will resist innovation because they know that more fundamental changes in processes or systems will wreak havoc with the results on which they are measured. Production managers have always seen their job as one of minimizing costs and maximizing output. This dimension of performance has until recently sufficed as a basis of evaluation, but it has created a penny-pinching, mechanistic culture in most factories that has kept away creative managers.
Every company I know that has freed itself from the paradox has done so, in part, by developing and implementing a manufacturing strategy. Such a strategy focuses on the manufacturing structure and on equipment and process technology. In one company a manufacturing strategy that allowed different areas of the factory to specialize in different markets replaced the conventional cost-cutting approach; within three years the company regained its competitive advantage. Together with such strategies, successful companies are also encouraging managers to focus on a wider set of objectives besides cutting costs. There is hope for manufacturing, but it clearly rests on a different way of managing.
The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes
(A) summarizing a thesis
(B) recommending a different approach
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes
2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives
3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations
4. The author refers to Abernathy’s study (line 36) most probably in order to
(A) qualify an observation about one rule governing manufacturing
(B) address possible objections to a recommendation about improving manufacturing competitiveness
(C) support an earlier assertion about one method of increasing productivity
(D) suggest the centrality in the United States economy of a particular manufacturing industry
(E) given an example of research that has questioned the wisdom of revising a manufacturing strategy
(A) qualify an observation about one rule governing manufacturing
(B) address possible objections to a recommendation about improving manufacturing competitiveness
(C) support an earlier assertion about one method of increasing productivity
(D) suggest the centrality in the United States economy of a particular manufacturing industry
(E) given an example of research that has questioned the wisdom of revising a manufacturing strategy
5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
(C) disinterested
(D) respectful
(E) adulatory
(A) cautious
(B) critical
(C) disinterested
(D) respectful
(E) adulatory
6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology
(A) personal observation
(B) a business principle
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology
7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising
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27 Jun 2008, 17:29
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Notes:
Para 1: Historical context. Cost cutting.
Para 2: Paradox of historical cost cutting.
Para 3: Specific example. Abernayth’s study. Tie innovation to cost cutting.
Para 4: Author’s point. Manufacturing strategy.
1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
Correct. Passage says in para 4 “There is hope for manufacturing, but it clearly rests on a different way of managing”
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes
2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
Correct. Passage says “been trying to improve productivity—and therefore enhance their international competitiveness—through cost-cutting programs”
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives
3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations
Correct. Author is emphasing “cost cutting” in 1970s.
4. The author refers to Abernathy’s study most probably in order to
(A) qualify an observation about one rule governing manufacturing
(B) address possible objections to a recommendation about improving manufacturing competitiveness
(C) support an earlier assertion about one method of increasing productivity
(D) suggest the centrality in the United States economy of a particular manufacturing industry
(E) given an example of research that has questioned the wisdom of revising a manufacturing strategy
Correct. Study questions “cost cutting”.
5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
Correct. Author says we need alternative approach.
(C) disinterested
(D) respectful
(E) adulatory
6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
Correct. Rest all are discussed in different paragraphs.
(D) an example of a successful company
(E) an illustration of a process technology
7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
Correct. Para 2 says “cost-cutting approach to increasing productivity is fundamentally flawed”
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising
Please post the OAs.
Para 1: Historical context. Cost cutting.
Para 2: Paradox of historical cost cutting.
Para 3: Specific example. Abernayth’s study. Tie innovation to cost cutting.
Para 4: Author’s point. Manufacturing strategy.
1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
Correct. Passage says in para 4 “There is hope for manufacturing, but it clearly rests on a different way of managing”
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes
2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
Correct. Passage says “been trying to improve productivity—and therefore enhance their international competitiveness—through cost-cutting programs”
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives
3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations
Correct. Author is emphasing “cost cutting” in 1970s.
4. The author refers to Abernathy’s study most probably in order to
(A) qualify an observation about one rule governing manufacturing
(B) address possible objections to a recommendation about improving manufacturing competitiveness
(C) support an earlier assertion about one method of increasing productivity
(D) suggest the centrality in the United States economy of a particular manufacturing industry
(E) given an example of research that has questioned the wisdom of revising a manufacturing strategy
Correct. Study questions “cost cutting”.
5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
Correct. Author says we need alternative approach.
(C) disinterested
(D) respectful
(E) adulatory
6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
Correct. Rest all are discussed in different paragraphs.
(D) an example of a successful company
(E) an illustration of a process technology
7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
Correct. Para 2 says “cost-cutting approach to increasing productivity is fundamentally flawed”
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising
Please post the OAs.
28 Jun 2008, 10:57
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I got this one wrong.
My reasoning behind 4 would be the immediate earlier statement made by the author:
(I know! I myself was thinking later on - How did I miss this one?)
"the cost-cutting approach hinders innovation and discourages creative people" - Assertion made by the author.
This cost-cutting approach is the method adopted to improve productivity.
Option C states this clearly.
Am I right fresinha12.
My reasoning behind 4 would be the immediate earlier statement made by the author:
(I know! I myself was thinking later on - How did I miss this one?)
"the cost-cutting approach hinders innovation and discourages creative people" - Assertion made by the author.
This cost-cutting approach is the method adopted to improve productivity.
Option C states this clearly.
Am I right fresinha12.
